Stamp Duty Land Tax planning
Most legacy SDLT avoidance schemes were designed to exploit unintended gaps in the SDLT legislation by, for instance, turning a single step purchase of property into a multi-step transaction and applying different SDLT exemptions to each step with the result that no SDLT was payable on the overall transaction. A good example of this planning was defeated by HMRC in the Project Blue case in which the taxpayer tried unsuccessfully to combine the relief for sub-sales with the relief for alternative finance.
Should I agree to use an SDLT avoidance scheme?
You should think very carefully and take independent legal advice if you have been offered an SDLT avoidance scheme and are considering using it. The current negative attitude of the judges to tax schemes combined with the SDLT anti-avoidance legislation that has been enacted over the past several years plus the GAAR , the requirement to disclose the use of tax schemes to HMRC and HMRC’s more vigorous use of the tax penalty rules means that SDLT planning schemes which serve no genuine commercial purpose are likely to be attacked and defeated.
There are still some SDLT schemes being marketed and the ones that I have been asked to review are technically flawed and do not work. A good practical rule of thumb when looking at an SDLT avoidance scheme is whether you would feel comfortable explaining as a witness in an SDLT appeal against HMRC in the tax tribunal why you entered into the scheme transactions.
What types of SDLT savings opportunities are left?
The attention of tax advisers in SDLT planning is now focused on legitimate things like maximising the available statutory SDLT reliefs, applying the statutory definitions correctly and avoiding falling foul of traps in the SDLT legislation.
Examples include maximising claims for multiple-dwellings relief, applying the meaning of “dwelling” properly in order to fall within the lower Table B rates of SDLT (maximum 5%), claiming the lower rates for mixed use property and avoiding mistakes when claiming relief under the 15% corporate rate for dwellings or the 3% higher rates rules for additional dwellings.